1. INTRODUCTION
The Nigerian Government in 2012 launched the
Nigerian National Financial Inclusion Strategy (NFIS) with the sole aim of
reducing the millions of people excluded from formal financial services from
46.3% to 20% by the year 2020 (NFIS, 2012). By including the numbers of Nigeria
without access to financial services have the potential of accumulating and
mobilizing bulk of deposits or saving outside the banking system which will
form part of investible funds that will promote productive activity as well as
leads to inclusive growth. According to Okoye, L.U. Adetiloye, K.A., Erin, O,
& Modebe, N.J. (2017) and Martinez (2011) access to finance can stimulate
inclusive growth when such funds are readily available and affordable to
various classes of economic agents for productive and economic ventures.
In real
terms, the gap between the financially reached and the unreached (banked and
unbanked) is enormous in Nigeria even after 58 years of
independence and 7 years of launching the Nigeria National Financial inclusion
strategy a bulk section of the adult population still remains financially
excluded. Despite the progress made, the financial exclusion rate stood at 34.5%
in 2018 from 46.3% in 2010 (EFInA 2018). With this statistics, it shows that
Nigeria as a nation still operate with large volume of physical cash for
financial transaction. Thus, the overall goal of financial inclusion in Nigeria
is to reduce the adult financial exclusion rates to 20% by 2020 which to us is
unachievable following the lack of policy by the Nigeria Government for
mobilization of savings across all sectors and region of the most populous
country in Africa. For us, most policies on ground are intervention programmes
geared towards enhancement of credit which is still yet to yield desired
results (NFIS 2012).
Nevertheless,
available statistics shows that the Nigeria economy has a population of 168million
people with 99.6million people falling under the adult class (EFInA, 2018). The
records further reveals that 39.2 million people i.e. 46.3% of the adult
population do not have access to formal financial products and services in
2010. In 2014, the exclusion rate declined to 41.6% i.e. 40.1 million people
excluded from banking and financial products while in 2018 the exclusion stood
at 36.8% i.e. 36.6 million adult Nigerians were excluded from the system.
Similarly, Nigerian adults having access to any other formal channel such as
microfinance institutions or insurance firms stood at 6.3% (5.3 million) in
2010, 10.5% (9.2million) in 2012;12.3% (11.5million) in 2014, 10.3% (10.0
million)in 2016 and 9.8% (8.9 million) in 2018 (EFFInA 2018). Also the
percentage of Nigerian adults who have access to informal financial services
stood at 17.4% (14.8 million) in 2010,17.3% (15.2 million) in 2012; 11.9% (11.3
million) in 2014, 9.8% (9.4 million) in 2016 and stood at 14.6% (14.6 million)
in 2018 while the rate of financially excluded adult Nigerians fell marginally
from 39.7% (34.9 million) in 2012 to 39.5% (36.9 million) in 2014. In total,
the number of adult Nigerians who were financially excluded actually raised
from 34.9 million in 2012 to 40.1 million in 2016 (CBN 2018).
However,
the interest derives from the recognition that, despite progress, large
segments of the population, as well as the corporate sector, are left out of
financial services (Hannig & Jansen 2010). The gaps in access, use, and
quality of savings accounts in financial institutions, and in the availability
of credit and insurance products among different segments of the economy are
still large (World Bank, 2014; Demirgüç-Kunt et al 2015 and Achugamonu, Taiwo,
Ikpefan, Olurinola, Okorie, 2016). In Nigeria, recent estimates suggest that
more than half of the poorest 37 percent are without accounts and 35 percent of
small firms face difficulties accessing formal financial services (EFFInA
2018). Also, there are large gaps in access to financial services between the
rich and poor, urban and rural dwellers, and men and women in Nigeria. Armed
with recently available data and statistics on access to and use of financial
services, this paper reviews the progress, challenges and the way forward for
financial inclusion in Nigeria.
Electronic
Payments
Our
concern here is to ascertain the percentage of adult population that has
transaction account with a regulated financial institution or that made an
electronic payment through a regulated financial institution in the last five
years of this initiative. Available statistics shows that 22% in 2010, 20% in
2012, 24% in 2014, 38% in 2016 and 40% in 2018 have transaction accounts or
made an electronic payment through a regulated medium in the last five years
(EFInA, 2018).However, with this progress made it is not clear whether the
target of 70 per cent of the Nigerian adult population having and using an
electronic payment product will be achieved by 2020.
Savings
Similar
to electronic payments, the percentage number of adult population that has a
savings-related accounts with a regulated financial institution increased by
24% in 2010; 25% in 2012; 32% in 2014; 36% in 2016 and declined to 24% in 2018
(EFInA, 2018). With this development, it is not clear whether the 2020 target
of 60% adult population having savings related product at regulated financial
institution will be achievable due to the challenges of a lack of unique
identification of customers and data constraints at the time of writing.
Credit
The
credit product of financial inclusion has to do with the percentage of adult
population that has a credit product through a regulated financial institution.
Available record shows that the number of credit accounts maintained an
irregular trend. In between 2010 and 2013 it was 2%, it rose to 3% in 2014 and
2016 and in 2018 it declined to 2% (EFInA, 2018). With this trend, the target
of 40 per cent of the adult population using a credit product at a formal
financial institution will not be achievable by 2020.
Insurance
An
assessment on the achievement of the insurance target was quiet low under
review period. The data provided reveal that 3% adult Nigerians have insurance
policy in 2012 while it declined to 2% in 2018. The big question before us is
that can we achieve the 40% target of Nigerian adult population by 2020.
Pensions
The
number of adult Nigerians registered with a regulated pension scheme increased
from 5% in 2014 to 7% in 2016 and 8% in 2018 respectively. The percentage of
adult Nigerians registered in a regulated pension scheme went up from 7.0 to 8
per cent over the period under review. While the trend is positive, is it
possible that the 2020 target of 40 per cent enrolment of adult Nigerians will
be achievable?
3
Channels Promoting Financial Inclusion in Nigeria
Commercial
Bank Branches
The
number of commercial bank branches decreased marginally from 5,508 to 5,462
branches between 2014 and 2015. Relative to the adult population, there were
5.7 branches per 100,000 adults in Nigeria as at December 2015, compared with
5.9 branches per 100,000 adults as at December 2014. Comparing the achieved
value with the 2020 target of 7.5 branches per 100,000 adults by 2015, the
actual status is not on track. Currently 5.5 per 100,000 people have been
achieved for 2016. Furthermore it reveals that the number of bank branches has
maintained a slow growth since 2011. This slowdown is the result of less focus
on branch growth due to increased use of non-branch channels (CBN, 2012).
Microfinance
Bank Branches
Although
the number of microfinance bank branches increased by 120 or 5.7 per cent
between 2014 and 2015, the number of microfinance bank branches per 100,000
adults remained at 2.3 between the period 2014 and 2015. Compared to the 2015
target of 4.5 microfinance bank branches per 100,000 adults, the achieved value
was only slightly more than half of the target. However, the current report
shows that in the
microfinance banking subsector, growth in bank branches has remained flat just
as for deposit money banks. The 2020 target is set at 5 MFB branches per
100,000 adults. The target was retained because of a shift in emphasis to
branchless banking platforms (CBN, 2018).
Automated
Teller Machines (ATMs)
The
number of ATMs in Nigeria increased by 517 or 3.2 per cent from 2014 to 2015,
while the number of ATMs per 100,000 adults grew marginally from 17.0 to 17.1(CBN,
2018). As the actually achieved value was only about
40 per cent of the target, the 2015 target of the ATM key performance indicator
(KPI) was not met in 2015 (CBN, 2018).
However, 2020 target for ATM deployment is set at 203 ATMs per 100,000
adults. The proposed target is aligned with that defined for Cash-less Nigeria
in 2015 but available statistics reveals that the current status of ATM per
100,000 adults stood at 17.5 ATM as at 2016 (CBN, 2018).
Point-of-Sale
(PoS) Devices
For
the computation of the PoS devices KPI, only deployed PoS terminals were
considered. Based on this narrower definition, there were 116,868 POS devices
as at December 2015, compared to 82,549 deployed devices as at December 2014.
In terms of PoS devices per 100,000 adults, the value increased by 37.6 per
cent from 88.3 to 121.5. While this was only 27.5 per cent of the 2015 target
of 442.6 PoS devices per 100,000 adults, the status is not fully clear as other
PoS devices, such as mobile phones, were not captured. Furthermore, the target
for POS and mPOS is set at 200 POS devices per 100,000 adults by year 2020. The
geographical distribution of the devices is expected to cover the regions with
the highest exclusion rates which are the North East and North West. However,
currently 76 pos per 100,000 were achieved for the 2016 (CBN, 2018).
Agents
As
at December 2015, there were 688 bank agents at three financial institutions.
Additionally, the Geospatial Mapping Survey of financial access points captured
3,567 agent locations which were engaging in mobile money activities as at
April 2015. While based on these numbers, the 2015 target of 31.0 agents per
100,000 adults would not have been met; a complete assessment cannot be made(CBN,
2018).This is because data on the number of mobile
money agents as at December 2015 was not fully available from mobile money
operators. Also, agents were not uniquely identifiable across financial
institutions and mobile money operators. Recently, the strategy seeks to
grow the Agent network from 10 Agents per 100,000 Adults in 2016 to 476 Agents
per 100,000 Adults in 2020. This is expected to be driven by several
initiatives in the financial sector aimed at bringing financial services closer
to the un-served and underserved using non-physical branch platforms(CBN,
2018).
4.
Challenges to Financial Inclusion in Nigeria
In Nigeria,
access to financial services has remained a major challenge to economic development
and lifting people out of poverty cycle. The reasons commonly cited for this
state of affairs include:
i
Poverty: This is
state where an individual or family is living below one dollar per day. In other
words, poverty is hunger. It is lack of shelter, being sick and not able to see
a doctor. Poverty is about not having enough money to meet basic needs
including food, clothing and shelter. The survey by EFInA (2018) shows that
64.9 percent of the unbanked population of 60.1 million cannot afford to have
access to financial products and services both formal and informal in Nigeria.
Furthermore, we discovered that 35 percent of the exclusion population have
irregular income, 20 percent do not have a paid job. 19 percent could not
afford the cost to be financially included.
ii
Institutional
Exclusion:
Institutional exclusion is another challenge to financial institution in
Nigeria. By this, we mean not meeting the basic requirement to have a bank
account. EFInA (2018) document that 23 percent of 60.1 million financial
excluded Nigerians could not have access to financial products or services
because banks and other financial institutions are too far from them, while 20
percent of the unbanked population are basically illiterate i.e. cannot read
and write or cannot withstand the rigorous process and documentation involved
in either opening bank account, withdrawing of cash or getting of other
financial services and products.
iii
Attitude/Perceptions:
Nigerians’
attitudes and perception about financial product and services is such that they
prefer keeping cash at home than taking it to the bank. This has affected their
financial behavior and as such hamper the drive for financial inclusion. The
EFInA (2018) reveals that 23.6 unbanked populations in Nigeria prefer to keep
cash at home and do not have reasons to have any financial product or services.
iv
Infrastructure
Deficit: Finance
and it services have gone digital, as such it requires adequate infrastructure
to drive financial inclusion. Since the advent of agency/mobile banking in
Nigeria, technology is seen as an alternative delivery channels to quickly
reach to the unbanked population. But the truth remains that inadequate
infrastructure has left majority of the people very far from the financial
service points thus excluding them from access to financial products and
services.
v
High
reliance on cash: The dominance of liquid cash in the lives of
the poor doesn’t just make it harder for them to manage their finances; it also
perpetuates their marginalization from the formal economy by making it more
expensive to serve them (Radcliffe &Voorhies, 2012). Mas (2012) argue that
financial inclusion is the process of bridging three clouds: 1) a physical cash
cloud which is the legacy financial system where most poor people operate
today; 2) a digital cloud where money is stored in a virtual account; and 3) a
psychological cloud (i.e. the brain) through which people interpret and plan
their financial lives. Connecting the physical and digital clouds unlocks
"access" while connecting the digital and psychological clouds
unlocks "usage."
5. CONCLUSION
Financial
inclusion is an indispensable tool for economic development and poverty
reduction in Nigeria. However, despite overwhelming evidence showing that
financial inclusion has significantly contributed to the lifting from poverty
of the poor and low-income earners, there is still a considerable gap in access
to formal financial services in Nigeria. Unlike developed economies where the
poor have financial products suited to their needs, the poor in emerging
economies have very narrow options (Karlan and Murdoch, 2009).
Despite
the difficult and expensive nature of building bank branches in all rural
locations in Nigeria, there are several innovative and less costly means with
which financial service providers can bridge the gap between financially
reached and unreached. They include internet banking, prepaid cards,
debit/credit cards and mobile money. However, considering the real constraints
(distance or inaccessibility to banks, literacy and lack of awareness,
complexity and high cost of banking products, etc.) facing the poor and
unbanked in their quest to access formal financial services, mobile money
appears to be the most promising and sustainable means to further deepen access
to formal financial services. Mobile phones are all-over and basic mobile
phones can support mobile money services in Nigeria with help of communication
infrastructure on ground. Mas and Kumar (2008) and Shrier, Canale and Pentland
(2016) have identified benefits of mobile money services as one that is capable
of reducing cost of delivering financial services, increased penetration, and
the ability to sell various services to the unbanked. With the right business
model and regulatory policies, mobile money can stimulate increased savings by
the poor, support access to other financial services such as credit and
insurance, facilitate remittances (send and receive) with less risk, and
conduct other financial transactions. All in all, mobile money will increase
participation in economic activities and ultimately enhance economic
development.
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